USCGC Alexander Hamilton (WPG 34) (Cdr Arthur G. Hall, USCG) escorted the convoy HX-170 from 15 until 24 January and was then on the way to Iceland. One day earlier the store ship USS Yukon (AF 9) suffered an engine failure while on route to convoy ON-57 and was floating helpless in the sea. The cutter arrived on 25 January and took the ship in tow, while USS Gwin (DD 433) escorted the little convoy toward Reykjavik.

By noon on the 29 January, this convoy was only ten miles from their destination and the tug HMS Frisky (W 11) was ready to take the store ship in tow. When they were eight miles off Skaggi Point light, near the entrance to the swept channel to Reykjavik, USCGC Alexander Hamilton (WPG 34) cast the tow line and proceeded slowly ahead.

At 16.10 hours, U-132, which was patrolling off Reykjavik since eight days, fired a spread of four torpedoes at the little convoy, one of them struck the cutter amidships and destroyed all engines, including the emergency diesel generators, so no heat, steam, nor electricity remained. The other torpedoes missed their targets. At 16.45 hours, the ship was abandoned, the survivors were picked up by Icelandic fishing trawlers and were taken to Reykjavik. The tugs HMS Restive (W 39), HMS Frisky (W 11) and USS Redwing (ARS 4) tried two times to salvage the torpedoed vessel, but without success in the heavy seas. The destroyers USS Ericsson (DD 440), USS Livermore (DD 429) and the seaplane tender USS Belknap (AVD 8) screened the salvage operation.

At 13.15 hours on 30 January, HMS Frisky (W 11) took USCGC Alexander Hamilton (WPG 34) in tow, but she suddenly capsized at 20.28 hours. USS Ericsson (DD 440) then fired three rounds into the hull and left. As the cutter was reported still afloat in the evening, the destroyer returned to the scene, but found only an oil slick.